Buy Inflation, Not Growth

Below is an extract from a commentary available to subscribers at www.goldenbar.com on 5th July
2005.

Gold prices got hammered during Canada day (Friday), and I couldn't help thinking
how ironic and telling it is that the yellow metal of liberty be clobbered
right before the celebration of the birthday of America & Canada, nations
born in freedom; and that the writers who are most bullish on stock prices
still absolutely hate the metal and bow to the central bank. It proves Rothbard
right in his claim that the business cycle is solely the product of inflationism
(intervention), and its impact on the "money relation."

Recall: "Boom / bust cycles are caused - not by the mysterious workings
of the capitalist system - but by govern-mental interventions in that system." -
Murray Rothbard

The proof being that perma-bullish stock and bond traders (who almost by definition
hate gold bugs) know where their bread really comes from.

It doesn't come from real economic growth because monetary policy undermines
it - especially when it's easy for long stretches - as should be obvious from
the data in the table. That bread is bad. It comes from the fact that the Fed
remains unrestricted in expanding money and credit which causes the value of
money to fall, and as a consequence causes the value of goods (including capital
goods) to rise.

The harm that this does to the prospects for real economic growth (and your
freedom) is something that I write about all the time. But there are a lot
of morons running around out there who do not even partially understand those
consequences - all they know is that the Fed prevents stock market crashes.

They think that any institution that is pro-stocks and pro-greed is pro-capitalism
and good for their pocket-book.

Capitalism is about making money after all and no one makes more money than
the Fed does - literally: as it runs off its printing presses. It is true many
of them will acknowledge the existence of eternally rising prices but the causes
that they point to are confused, and besides they say, stocks beat inflation...
all that one has to do is to speculate correctly and he can then participate
in the wealth transfer that begins with monetary policy.

He can bud in line if you will.

But capitalism is really about accumulating capital, making real profits and
creating wealth.

Not that there's anything wrong with making money - money is what we measure
our profits in... PROVIDED THAT IT IS SOUND. But it isn't sound. The profits
are temporary & illusory, as are the gains in asset values.

For recognizing this and telling people this I get to be called a "gold kook."

Ed Bugos is a former stockbroker, founder of GoldenBar.com,
one of the original contributing editors to SafeHaven.com and
former editor of the Gold & Options Trader. He continues to publish commentary
on market and economic trends; and provides gold, economic and mining research
to private clients worldwide.

The editor is not a registered advisory and does not give
investment advice. Our comments are an expression of opinion only and should
not be construed in any manner whatsoever as recommendations to buy or sell
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at any time. While we believe our statements to be true, they always depend
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